A “contingent offer” occurs when a buyer makes an offer on a home, the seller accepts it, and the purchase depends on meeting specific criteria. Contingent offers are crucial because they allow home buyers to back out and have their earnest money deposit returned if these criteria aren’t met. Some contingencies are so common that most buyers include them in nearly every offer.
So, what are these common contingencies?
Here are some typical ones buyers often include when making an offer:
Home Inspection Contingency: One of the most popular contingencies, buyers can hire an inspector to thoroughly examine the property before closing escrow. If the inspection reveals any issues the buyers are not comfortable with, they can either attempt to negotiate repairs with the sellers or, if desired, back out of the transaction.
Appraisal Contingency: This contingency allows buyers to have the home appraised to confirm its value aligns with the agreed-upon price. If the appraisal value is less than the agreed-upon price, buyers can walk away from the purchase.
Mortgage Contingency: With this contingency, the purchase depends on the buyer successfully securing a mortgage. If the financing falls through for any reason, this contingency allows buyers to back out of the agreement without penalty.
These contingencies help protect buyers and provide them with options if unforeseen issues arise during the home-buying process.
Related Post: Is waiving the inspection contingency a mistake?
What is crazy is that people were waving ALL contingencies at the height of the home buying frenzy post Covid. Seemed suicidal to me. I wonder how many buyers during that time regret the waivers